August Jobs Report: Optimism, or a mixed bag?

For those old enough to remember the 1960s sitcom, “The Andy Griffiths Show,” there was the unforgettable character of Marine Sergeant Gomer Pyle, who when surprised, or startled, would yell out "Well, gollee!"; and that was the reaction from many economists, lawmakers, and pundits after Friday’s Labor Department released the August job figures that showed 162,000 non farm jobs; a figure that surprised almost everyone with an anticipated 56,000, or at most 62,000; and, while this was welcomed in many quarters, a closer look reveals much, but it’s important to remember that one report is just a snapshot in time, not a predictor of future outcomes.

Nevertheless there are some notable developments, a rise in manufacturing, mostly attributable to non-residential construction of data centers, and local education, a seasonal bump from the beginning of the school year with teachers and other personnel returning to work after the summer break; but, joined with a slight increase among leisure and hospitality, and stable numbers for health care workers, it does show that the American jobs outlook is stable - perhaps too stable for Federal Reserve rate cuts.. 

“Those sectors added 59,000 and 42,000 jobs, respectively. Payroll gains in August were more than five times the monthly average for the last 12 months, which is 31,000, according to the Labor Department,” according to CBS News

It’s all about wages

But the caveat is that wages are now at 3.4 percent, far less than the rate of inflation of 4.2 percent, forcing many families to struggle with the cost of housing, food and gasoline, now averaging, due to the war on Iran at $4.16 a gallon/

"Slowing nominal wage growth suggests workers don't have the leverage to bid up their wages," Elise Gould, a senior economist at the Economic Policy Institute, a nonpartisan think tank, said in an email. "Even with low unemployment, the depressed hires rate means workers aren't finding new jobs to raise their wages."

“An upside surprise in payrolls will likely ramp up concerns about a rate hike, but that outcome is in the hands of next week’s inflation numbers,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, to CNBC, and  “If those come in cooler than expected, the Fed will likely feel comfortable discounting potentially inflationary signals coming out of the labor market.”

Taking it in hand

Revisions to the monthly reports are expected, considering the collection period, from Labor, and there was the good news of an upward revision for June and July to the tune of 55,000. Taking that into account employers added 21,000 jobs in July.

These numbers “may corroborate that recent softness was temporary rather than indicative of a broader deterioration,” Jerry Tempelman, vice president of economic and fixed income research at Mutual of America Capital Management, said in a statement reported by The Hill.

“Net, net, the labor market is alive and well and generating thousands of new jobs to help keep economic growth squarely in the plus column,” said Chris Rupkey, chief economist at Fwdbonds,” according to CNBC reports.

Or does it? All of these reactions give a certain amount of not merely caution, but uncertainty among those on Wall Street, as well as Main Street, as to what the future means for the American economy. We are not in solid enough territory to make these claims, say critics.

Examining earlier reports, the dial has not moved much over the last several months and we are still harnessed to a “low hire-low fire” jobs based employment atmosphere, but also, in general, to the “K shaped” economy, with those at the top of the economic bar spending freely, while those at the bottom are treading water; and, especially with those populations facing cuts in Medicare and Medicaid, not to mention the cuts in the Supplemental Nutrition Assistance Program, that includes not only adults but their children, showing the road ahead is less travelled.

All politics are local

We can’t omit the intersection of politics into the nation’s economy, and we have this: “With two months to US midterm elections, consumers are likely to take grim notice this [Labor Day] weekend of historic pain at the pump,” averaging $4.19 across the country, according to Bloomberg reporting, “and well above the $3.80 per gallon drivers paid on July 4, the usual peak of summer driving season. Meanwhile, diesel prices rose to a record high of $5.85 a gallon; ”the latter affects the delivery of food across the county creating a singular point because for previous Septembers they have never risen that high.

Going even further, “President Donald Trump, who has publicly dismissed consumer concerns about high energy prices amid already elevated inflation, recently began to change his tune, saying gas prices are “important.”

Neale Mahoney, a professor of economics at Stanford University who worked on fuel policy in the Biden administration, appeared to agree: “The fact that we’re heading into the home stretch of election season with gas prices at historically very high levels, with no obvious signs of relief, should be very concerning to incumbent politicians.”

A look in the rearview mirror from The Hill, shows that, “Economists have pointed to lower net migration rates as a cause of stagnant labor data, as the Trump administration has carried out a widespread deportation campaign. The labor force participation rate has also declined by 0.5 percentage points from January, although it ticked up to 61.6 percent in August, the BLS reported Friday, strong numbers for this month’s Federal Reserve meeting.”

“August’s solid job growth is even more notable since the government cancelled Temporary Protected Status for Haitian refugees on July 27, forcing workers who used that status to qualify for authorization to leave the work force,” Bill Adams, chief U.S. economist for Fifth Third Commercial Bank, said in his press statement.

The question remains is how long can that growth last without these workers? Taking into account that in In July ICE arrears topped a record of 50,000 in July. And, If that trend continues the abatement of workers, albeit low income, will have a deleterious effect on the workforce.

“Graeme Blair, co-director of the Deportation Data Project says the uptick is due to [Mark Wayne] Mullin's change in tactics” and, "What we're seeing is an expansion in all of the different ways that ICE is detaining people," Blair told NPR. "They're arresting people at airports, at ICE check-ins, at immigration courthouses and this is the result of that."

AI, love it, or lose it?

Another area of close examination is the rise of AI data centers and the widespread criticism from environmentalists, and local communities concerned about the drain on water and energy sources. But, it’s the seeming drain on employment that is getting an equal share of attention as more and more entry level positions are now being handled by AI. 

In the not too distant past entry level workers were told to learn how to code, but that is now being generated by AI and employers are eager to harness this cheaper and more reliable source of labor. Annenberg Public Policy Center in Mid August found that 61 percent of Americans are opposed to their construction,

In June there was a Reuters/Ipsos poll that noted “Half of Americans fear that the ​rise of AI could put them or someone in their household out of work, according to a new Reuters/Ipsos poll ‌ that also showed widespread angst at how widely the technology is being adopted.”

Using data gathered over six days, it “found that 53% of Americans shared that worry, which was spread fairly evenly across respondents by age, gender and education level. Some 37% of respondents said they did not worry about this at all with the remaining 10% either unsure ​or opting not to answer the question.”

One important caveat: “Skepticism over AI runs higher among Democrats, whose party attracts more college graduates, than among Republicans, ​who have attracted more working-class voters since President Donald Trump's rise. Some 61% of Democrats said they worried about AI coming for jobs in ​their household, compared to 47% of Republicans.”

In a discussion of the effect of AI on American jobs, it was noted  by marketplace.org that AI does not automatically mean a job loss, or that it is a zero sum game.

“AI, as a technology itself, is different from technologies in the past,” said Nigel Melville, an associate professor at the University of Michigan who studies the socio-technical implications of AI. He said agentic AI’s capacity to mimic human behavior does separate it from previous technologies, but it’s hard to know how that will impact the labor market.”

Taking a step back, or perhaps forward, what remains is consumer confidence and The University of Michigan Survey of Consumers for August found that 51.7 pf Americans felt confidence in the economy. 

Surveys of Consumers Director Joanne Hsu wrote, in part, that, “Consumer sentiment confirmed its early month reading, falling about 6% from last month and landing about 11% below a year ago amid continued worries that inflation will remain elevated for the foreseeable future. Sentiment declines in August were seen for all political groups and were particularly acute among Republicans. Moreover, groups who are typically less-equipped to absorb increases in cost of living also exhibited stronger decreases in sentiment, including older consumers, lower- and middle-income consumers, and those with no stock holdings”.

In an August poll from the Economist/You,Gov found that 23 percent of US citizens feel that the economy is weak.

Oh, Canada

Furthermore, “Any re-escalation of trade tensions will likely exacerbate these trends." which brings us to the trade war with Canada, what the Wall Street Journal called, “the dumbest trade war in history,” and which has baffled economists, and as we noted last month, will cost American consumers dearly, especially in border states such as Michigan and Maine, both swing states in the upcoming November midterm elections, and critical for a victory by Trump.

As has been reported widely this came on the heels of early moves by the president during his first quarter of his second administration; and, while there was a pull back, of sorts, this resurgence seems to have no clear agenda, 

Let’s recall that  in June there was a fresh round of taxes on Canada: three new tariffs for 554 Canadians, “citing Section 338 of the Tariff Act of 1930 for the first time” and covering . .  alcohol, dairy and related goods, wood, electronics, furniture and plastics, hockey equipment, among other goods, including clothing, games, and art, all set to begin August 19 unless reduced, or modified through pending negotiations between the two countries.

At that time American households data research showed they could in effect face a $920 tax rate per household;and, for the bottom quintile the tax rate will rise by 0.8 percent points, and 0.6 percent for the top quintile according to TPC estimates.

The Peterson Institute reported in July that, “Cast aside by the new tariffs is the US promise and legal obligation of zero tariffs made in 2020 when Trump signed the United States-Mexico-Canada Agreement. Prices for the goods affected by these new tariffs, and others in train, could start rising in the runup to the November 2026 midterm election.  Many of the affected goods are currently subject to zero or very low tariffs, under the USMCA, other trade pacts, and the US tariff schedule bound in the World Trade Organization.”

Currently negotiations between the two long term allies is at a stalemate, and Canadian Prime Minister Mark Carney has said,"The attitude of ​the United ⁠States... has been one that the core Canadian industries either would be subsidiaries, effectively, of the United States industries, or (Washington) would put in ⁠place terms ​where those industries would be gradually wound ​down in Canada and wiped out," he said emphasizing that "Of course, we're not going to accept ​those terms."

What will Kevin do?

All eyes are now on the Federal Reserve and whether it will hold interest rates steady, increase, or cut them as the president wants. Kevin Warsh, who succeeded Jerome Powell as Fed Chair, has stressed that he feels the central bank should be independent from the executive branch, but some observers are not so sure.

“Warsh himself has said the president has had no impact on his decisions and, in July congressional testimony, cited the Fed holding rates steady and not cutting as evidence of the central bank’s independence. At the same time, Warsh has said that the president and other politicians have a right to comment on Fed policy,” according to a CNBC report.

What is paramount is how the Fed can meet its twin mandate of full employment and keep inflation below 2 percent, a goal that we have seen is becoming increasingly challenging.

Current rates are between 3.50 to 3.76 and most predictions are for a hike, contravening Trump’s wish and has threatened to cut off trade with several countries unless there are rate cuts, and has said:

“Lower the interest rates because the U.S.A. is a much stronger credit than it was just a short time ago!” he wrote in a post on Truth Social. “A STRONG COUNTRY MEANS A LOWER INTEREST RATE – IT’S A BETTER CREDIT.”

“Without the United States agreeing to allow them their big surpluses, and we could stop that immediately, they would no longer be considered financially ELITE!” he added. “LOWER THE RATE OR I’LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT.”

“Traders are now pricing in a 60 percent chance that the Fed hikes rates by a quarter point at its next meeting this month, according to CME FedWatch, which tracks bets placed on future central bank decisions,” reported The Hill, and in what appears to be a threat added, ““The Fed Board, with its great new leader, must get smart – BE PATRIOTS for a change,” Trump said. “High interest rates put the U.S.A. at a very unfair disadvantage, and I won’t allow that to happen!”

The next release of the Consumer Price Index will be on Sept. 11 and the Federal Open Markets Committee meets on Sept. 15-16. Till then it's all conjecture.

July Jobs Report shows a loss

Friday's July Jobs report from the US Labor Department sent shock waves reverberating across a range of people in government, universities, think tanks, banks and Wall Street with the loss of 23,000 jobs; but, in actuality, as the report stated things “changed little,” from June, but, in and of itself, with standard revisions and no rambunctious hiring, the loss was not a great surprise. It is worth noting that just under 70 percent of businesses responded to the government survey, the highest in more than two years, despite a loss of respondents over the long term, making this report especially significant for evaluation.

Those customary revisions showed April and May down to a cumulative loss of 103,000 bringing the monthly average for this year to 60.000 gains.

For some observers there was hope that with the March and April reports seeming to show a surge in hiring, that July was destined to sustain that growth. Even with that in mind, a review of the recent economic landscape of the US shows sustained blows to not only employment, but the immigration crackdown that deported hundreds of low skilled labor,  the yo-yo tariffs, and the Iranian war - in particular - things could have become much worse.  The current round of talks is not guaranteed to open the Strait of Hormuz freeing the transport of oil and fertilizer, important components of transportation, and production across the world, but especially in the US where gasoline prices, on average, have been as high as $4.69 per gallon of regular gasoline.

The unemployment rate at 4.1 is also little changed, but there is legitimate concern that further employment losses joined with the high rate of inflation and its effect on interest rates can cause headaches from Main Street to Wall Street as hundreds of American working families face not just high grocery and gasoline prices, but expensive costs for housing, whether buying, or renting, especially in urban areas, showing that affordability is not a political buzzword.

“We have a labor market that’s stable but stuck in second gear,” said Lydia Boussour, a senior economist at the consulting firm EY-Parthenon. “We still have an environment where those supply shocks are working their way through the economy, and a lot of uncertainty, and that will keep businesses cautious in hiring,” reported The New York Times.

While companies are not slashing payrolls, the “low hire-low fire” atmosphere cannot remain indefinitely, just as an economy sustained by high income consumers is not viable as it threatens to jettison the middle class.

“This kind of equilibrium can’t hold indefinitely. A market frozen between low hiring and low firing is only stable as long as nothing pushes on it. Should demand soften, the lack of hiring leaves no cushion to reabsorb workers who lose their jobs, and what now reads as a quiet labor market could tip into a rising unemployment rate quickly. The low-hire, low-fire dynamic has been remarkably durable, but durability isn’t permanence. The longer it persists, the more it’s worth watching for the first sign of which direction it finally breaks,” as we reported from the Hiring Lab in May,

One aspect getting a lot of attention in the last few months are hourly wages which “grew 3.5 percent 3.2 percent over the year, the slowest pace since May 2021 and likely less than the rise in prices over the same period,” added the Times.

Current inflation as of this date is 3.5 percent, down from 4.2 in May, according to the US Bureau of Labor Statistics.

The July price index will be released on August 12, and that will be a bellwether for further analysis, and predictions for the American economy.

One move that will please the White House is the growth in construction, but that is focused less on residential, but more on the construction of those controversial AI data centers, to the tune of 22,000 jobs; but, even with environmental concerns on water and electricity usage, this horse is out of the barn and is unlikely to return.

“There is no parallel in American history for the boom underway in the construction of data centers, fueled by companies with functionally unlimited cash that are racing to supply skyrocketing demand for their A.I. models, “ reported the Times.

According to Kush Desai, a White House spokesman, who said in a statement, “The Trump industrial resurgence is on schedule,” and is “unleashing more private-sector growth through President Trump’s proven economic agenda of tax cuts, deregulation and energy abundance.”

“It’s a sharp reversal from what we’ve seen in the past,” said Glassdoor chief economist Daniel Zhao. exercising some caution by saying “It’s also coming at a time when there’s an incredible amount of hype in the tech industry around data centers, and it’s just not showing up in the employment numbers.”

Healthcare is still reigning supreme in job growth, and, with our ageing population, is bound to continue; but, in some geographic areas, especially in the South, many of these jobs will suffer a loss with the end of the Temporary Protection Status for Haitians who make up a considerable bulk of health care employees, especially in nursing homes. This may have accounted for a slower growth of 22,000 jobs.

Of equal concern, especially to the Federal Reserve, is the Labor Force Participation rate, for workers between the ages of 25 and 54, and while July gave only a slight increase of 61.4, the employment ratio of 58.9 decreased by 0.4 percentage point. 

June showed a fall of six tenths of a percentage point, for the LFP, the largest “one-month drop in more than 70 years outside of the pandemic,” bringing the total net loss of the LFP to a decline of 0.7 percent since January,

Also falling is the leisure and hospitality industry, as American families, and individuals, face higher inflation, and with weakened wage growth, those dinners out, hotel stays, and bar events are taking a downward trend from a once solid area of growth (it dominated for many months) with a loss of 80,000 jobs, which didn’t get the anticipated World Cup bump.

Threatening to eat further into American pocketbooks are tariffs which have taken a new turn after the US Supreme Court, in February, struck down the tariffs that President Trump had created under the International Emergency Economic Powers Act; and, on July 23 using a broad interpretation of Section 301 the US is adding tariffs “relating to forced labor that covers over 80 trading partners. The Tax Policy Center (TPC) estimates that these finalized provisions will raise $581 billion over 2026-2036 (less than the draft version of the tariff). The rate varies from 10 to 12.5 percent and is applied preferentially for certain trading partners, many of whom have previously signed a trade agreement with the administration.”

Critics have been quick to point out that this is a pretext from the administration to reestablish the tariffs that SCOTUS eliminated,

Earlier in June there was a fresh round of taxes on Canada: three new tariffs for 554 Canadian products, “citing Section 338 of the Tariff Act of 1930 for the first time” and covering alcohol, dairy and related goods, wood, electronics, furniture and plastics, hockey equipment, among other goods, including clothing, games, and art, all set to begin August 19 unless reduced, or modified through pending negotiations between the two countries.

“Prices for the goods affected by these new tariffs, and others in train, could start rising in the runup to the November 2026 midterm election. Many of the affected goods are currently subject to zero or very low tariffs, under the USMCA, other trade pacts, and the US tariff schedule bound in the World Trade Organization,” reported the Peterson Institute.

American households could in effect face a $920 tax rate per household;and, for the bottom quintile the tax rate will rise by 0.8 percent points, and 0.6 percent for the top quintile according to TPC estimates.

With growing uncertainty about the tariffs urban centers such as Chicago have seen less economic growth than forecasted, due to tariffs and high borrowing costs late last year, and with these new tariffs looming on the horizon its effect on employment is bound to reverberate, as they did in 2025 when Gus Faucher, PNC Chief economist told Crain's Chicago, “There are a lot of interest rate-sensitive industries in Chicago, a lot of internationally focused industries in Chicago. And so tariffs, high interest rates have been more of a drag on Chicago than in the national economy."

Interest rates continue to be a hot topic for observers and at its last meeting the Federal Reserve Open Markets Committee has kept rates the same as it did last month holding them at 3.5 percent to 3.75 percent, but there was dissension with three members saying that borrowing costs should have been raised to ease inflation.

That traditional 2 percent target range for inflation “has overshot that level for half a decade and has moved further away from it over the past year; not only because of the Iran War but also President Trump's tariffs and other factors,” reported the Times.

Price stability is a concern of new Fed chair Kevin Warsh, but so far we have not seen how he will deliver it despite his statements to make price stability the main focus of his tenure.

In July before members of Congress he said,”When prices go up, I know it hits your constituents every day. I'm not trying to sound dismissive of it, but I also don't want to say that there's much that we can do about cattle prices or milk prices today. But there's a lot we can do to make sure that the entire grocery aisle doesn't have higher prices, and that's what we're committed to do.”

One day at a time with June Jobs Report

Thursday’s release of the Jobs Report for June by the US Labor Dept, provided a surprise showing of only 57,000 non-farm jobs giving some observers, including economists, as well as lawmakers, concerns, since 110,000 were predicted; and, with the revisions to April and May, there was increased concern about the overall economy.

While one report is not a predictor, the added complexity has created equal concern for the markets and later actions of the Federal Reserve Bank at its meeting later this month.

Reactions have been mixed: “Overall, this report shows a job market that is a bit shakier than the May data had indicated, but inflation still remains too high,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association, reported The Hill.

Inflation is the boogeyman and at 4.2 percent, it has become a significant factor in how middle and lower income American families feel about the economy, and as we’ve reported the last few months, it is still a K shaped economy, with those at the lowest bar struggling to afford rent and groceries although there is slightly less concern with the lowered gas prices - about 50 cents less - than before the Israeli-American led war against Iran, but with the fragile understanding, and disagreement about progress by Iran, that outlook could change.

Supporting the more positive view of the economy, “The University of Michigan Consumer Sentiment index was revised higher to 49.5 in June 2026, up from a preliminary reading of 48.9, although it remained slightly below forecasts of 50,” but Surveys of Consumers Director Joanne Hsu reported that, “. . .  sentiment remains in unfavorable territory at 13% below the February 2026 reading prior to the start of the Iran conflict, and nearly 20% less than a year ago. The cost of living remains at the forefront of consumers’ minds; for the third straight month, over half of consumers spontaneously mentioned that high prices are weighing down their personal finances.”

Wages are now at a 0.3 percent increase of 13 cents totaling $37.64 but it’s not enough to keep up with the rate of inflation, “Over the year, average hourly earnings have increased by 3.5 percent. In June,average hourly earnings of private-sector production and nonsupervisory employees rose by 7 cents, or 0.2 percent, to $32.38,” BLS noted.

Of equal concern is the labor participation rate that sank to 0.3 percent, 61.5 percent, a figure closely watched by the Feds, and of concern for economists as it takes course among the financial markets as a bellwether of its confidence.

"June job gains slowed but did not collapse and unemployment edged lower for the wrong reason. That doesn’t do much to reassure new grads but job gains are still well above last year -- the threshold is low and wages have gotten sticky. Those gains are reinforcing the floor under service inflation, which will further agitate hawks at the Fed. Financial market hopes that the Fed will not hike in response to the report are misplaced -- we still expect two hikes by year end. July was not an active meeting for a rate hike in our forecast,” said Diane Swonk, chief economist at KPMG U.S to Investing.com.

Adding to the plurality of opinions is Mohamed El-Erian, former CEO of PIMCO who added that,"Combining (the nonfarm payrolls and unemployment rate) with other data in the report -- including a dip in labor force participation to 61.5% and 3.5% earnings growth -- suggests that the supply-side of the labor force was the primary driver for the miss in job creation. As to implications for Fed policy, this should dampen market expectations for a rate hike this year -- a scenario I have argued was a misreading of the Fed’s likely stance."

“It can be simultaneously true that employers are adding jobs amid a fairly stable labor market and you are having trouble finding work,” explained Elizabeth Renter, senior economist at NerdWallet.

“Paired with the very real affordability constraints brought on by inflation and right now could be a painful time for the 7 million people who are out of work.”

While statistics might be seen as less of a concern outside the statistical stratosphere of the BLS, the 4.2 unemployment rate belies many other worries, but there is hope among others, and “Gregory Daco, the chief economist at EY, a consulting firm, said he anticipates job growth will stabilize at approximately 70,000 per month for the rest of the year, and the unemployment rate may edge up, but only slightly,” according to The New York Times.

Add to the picture, one of caution, with most people staying in their jobs, rather than seeking out a new one for fear of failing to find another.

The White House must be watching all of this with cautious optimism considering the low polls of President Trump’s handling of the economy, a June 2026 NPR/PBS News/Marist Poll, said only 33% of Americans approved of how Trump is handling the economy, his lowest-ever economic approval rating on the issue since Marist began asking the question in 2019; yet ,“Kush Desai, a White House spokesman, said the jobs report “reinforces that the American labor market remains solid thanks to President Trump’s economic agenda. In his post on social media, he called particular attention to the slight uptick in manufacturing jobs last month.”

A look at the prime age employment (ages 25 to 54) ratio of 80.2 for June is especially troublesome, and along with their LFP loss of 83.3 that falling rate combined with the overall rate of 0.6 percentage points, seems as if might be an outlier, “the biggest one-month drop since 2009, outside the pandemic plunge. The number comes from the survey of households, which is more volatile than the business survey, and it’s possible (even likely) that the figure was a fluke and will reverse next month. But it’s a very odd reading, especially after a period of remarkable stability in the measure,” opined The Times.

“The leading reasons why prime-age adults (ages 25–54) are not in the labor force are care-giving responsibilities and personal health issues or disabilities. According to data from the U.S. Census Bureau's Current Population Survey (CPS) and independent polling, these two factors account for nearly 72% of the reasons why prime-age adults opt out of looking for work,”

Child care, especially compared with other countries, where subsidies are often the norm, combined with the high cost of American healthcare are credible reasons and with recent changes to coverage for many people, a choice between trying to work but finding less opportunities and with most employed people staying put, it’s easy to see, that for some, especially with a wage earning spouse, or partner, might result in this change of 720,000 people leaving the workforce.

While leisure and hospitality took a hit, not getting the expected World Cup bump, professional and business services gained, and in areas where AI was expected to decimate, it did not occur. That increase of 36,000 might not be a predictor, but it shows that the AI degeneration that many have feared is not here yet.

Health care increased at 22,000, although at a slower pace than seen before the previous 12 months at 38,000.

Again, one report is not a predictor, but the analysis of the June report along with the revision of March to 129,000 from 172,000 and April from 176,000 to 143,000, even accepting revisions as standard procedure is giving some economists pause, but especially with that drop in labor participation, from the household survey which gives a more accurate portrayal of American jobs than the business survey, the next quarter will bear watching.

Fed keeps rates the same because of rising inflation

On Wednesday the Federal Open Market Committee of the Federal Reserve released an unexpected announcement that US interest rates would remain in the same target range, between 3.50 and 3.75 percent, a move that reflects the high rate of inflation, 4.2 percent -  the highest rate since April of 2023. Add to that the recent May jobs report of 172,000 jobs, the die was cast for stasis.

"Inflation remains elevated relative to the Committee's 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy," the FOMC said.

Significantly, this was also the first report under the new Fed Chair, Kevin Warsh, who was nominated by President Trump as a direct move to cut interest rates, (which the former chair Jerome Powell refused to do using standard macroeconomic metrics), so Wednesday also brought a closer look at Warsh, who has changed both the tone of his post meeting remarks; and, has diluted the predictive “dot plot” which previously has shown possible future Fed actions: but that’s not all, Warsh also has created several task force committees that seem a generation away from his baby boomer predecessor.

Another significant change was that there was almost near unanimous support for the stasis, and even with some members diverging in how much of an increase, it reflects a recognition of the economic reality of the world’s largest economy, and its reaction to what, and how the Fed manages their dual mandate of full employment and inflation at 2 percent, a standard that Warsh seems to have drifted away from in his later remarks.

Of course, the elephant in the room is the Memorandum of Understanding between the US and Iran to end the war that has affected, or sustained the costs of energy prices. With that in mind, Monday’s news that Iran would open the Strait of Hormuz has eased the price of regular gasoline prices down by 50 cents per gallon, but still a dollar higher than it was before the war began in February. 

Trump was under a great deal of pressure to get the Strait open before energy prices rose even further, and to calm the stock markets, at least for the time being; with critics noting that Iran has a powerful tool in the future, should there be greater pressure from the US or Israel. But, for the time being it seems to be smooth sailing.

Setting sail in a new direction is Warsh, and CBS News reported that, “The so-called easing bias — a sentence in recent FOMC policy statements signaling the central bank was leaning toward cutting interest rates — was removed from the June guidance, which was significantly slimmer than the typical statement.” 

"You might have already noticed something, a difference in today's policy statement," Federal Reserve Chairman Kevin Warsh said in a press conference to discuss the Fed's latest interest rate decision. "It's a bit shorter, a bit simpler and it dispenses with some older language. That statement just gives you the facts as best we can judge it."

This will be a closely watched feature at future meetings and also under examination are “what economists expect to be a major shift in the Fed's communication practices, including the aforementioned circumspect policy statements and lesser forward guidance. 

That said, the new task forces are causing scrutiny to review how it handles or assesses “issues ranging from communications to inflation data,” but some analysts and economists are wondering what exactly those words will mean in the future and if there is a political message emanating from the White House.

It may be too early to tell, but with as with all current political events, and remarks, hinging on the November midterms for Republicans to keep their majority, we have this from Warsh: "If I saw somebody in the grocery store, what I would say to them is that we cannot have a very significant effect on particular prices, the price of oil in the markets today, or even the price of a dozen eggs," and Warsh continued."But it's to make sure that those changes in oil or beef or eggs or milk don't broaden in the economy, don't have second and third effects,” adding that, "We're going to deliver on it."

If Warsh is going to work with the White House, as expected, then that will be a tough slog with nearly 80 percent of Americans disapproving of Trump’s handling of the economy.

Returning to that statement, without uncertainty, or even affordability, the stated goals for these task forces are “addressing the Fed’s communications, its balance sheet, its reliance on data sources, productivity and jobs, and the central bank’s inflation “frameworks.” 

As anyone who follows Washington knows, the creation of white papers, task forces, and committees can be a place where legislation goes to die, so observers are wondering what will be the result of these goals.

Speculation is often the bulwark of Washington, and with the possibility of the evaporating “dot plots”, it runs rampant, so we have this from The New York Times:

“The dot plot had fewer entries than usual. Mr. Warsh confirmed he was the only official who did not submit any projections, while another policymaker opted against submitting projections just for 2028. Mr. Warsh has argued that Fed officials should speak less frequently and forgo providing specific guidance about where rates may be headed in the near term to avoid limiting their ability to pivot if the economic backdrop changes.”

An analysis of the possible meanings of this are wondering if this is a case of being quiet and carrying a big stick? Is the stick coming from the White House?

 

In one of his atypical comments the president did say, in contrast to an earlier Oval Office statement when the new inflation report was released, "I love it. The numbers were great. You know what I really love? I love the inflation," but when asked about the Fed’s decision to maintain interest rates, President Trump told reporters, “It’s alright, whatever.”

“Trump later expounded a bit more, when queried about the prospect of a rate hike soon. “It could happen. It’s hard to believe. It just keeps our country down. It’s so unusual.”

“But in a sign of a changed tone on the part of the president, he then said this of Warsh: “We have a very good guy over there now, so I’m guided by what he wants to do.”

The Times did expand on what an interpretation might be noting, “Rising inflation and a steady policy rate translate to a lower inflation-adjusted or “real” interest rate, meaning the Fed is not restraining the economy as much as it once was. That risks making the Fed’s inflation problem even worse, especially at a time when the labor market has strengthened and the economy more broadly is holding up well.”

With several factors looming on the horizon, ending a war, rising inflation, a resilient American jobs market and political maelstroms, plus a central bank possibly beholden to the executive, it’s a very long road ahead for price control, and even harder for working American families.

Boom or bust for May Jobs report?

There was an old chewing gum commercial in the 1960s with the jingle of “double your pleasure double your fun.” and that seems to apply to the May jobs report released on Friday by the US Labor Department showing a gain of 172,000 non-farm jobs, a figure that was nearly double what economists had predicted, and giving once more, the label of resilience of American labor.

One aspect that gave a welcome tweak to the good news was that there was a broad inroad to jobs beyond health care that extended to both manufacturing and local government employment. But, while this was welcome news, another aspect was that people were staying on the unemployment line longer, and while new jobless claims had not statistically increased, those sitting on the bench have been a cause of concern for the future.

“The share of unemployed workers who have been out of work for 27 weeks or more rose to 27.5% in May, up from 20.4% a year ago and well-above pre-pandemic norms. The situation for many unemployed job seekers is grim, even in the midst of impressive monthly job gains,” said the Hiring Lab in its assessment of the May report.

It’s still a low fire, low hire environment, but with one fell swoop of the cards from further inflation, now at 3.8 percent, the scales could easily tip into recession; and, coupled with the uncertain outcome of the US-Israel war against Iran the effects on the national economy, and jobs could prove precarious.

Turning again to the Hiring Lab they offered this cautionary note:

“This kind of equilibrium can’t hold indefinitely. A market frozen between low hiring and low firing is only stable as long as nothing pushes on it. Should demand soften, the lack of hiring leaves no cushion to reabsorb workers who lose their jobs, and what now reads as a quiet labor market could tip into a rising unemployment rate quickly. The low-hire, low-fire dynamic has been remarkably durable, but durability isn’t permanence. The longer it persists, the more it’s worth watching for the first sign of which direction it finally breaks.”

When the Federal Open Markets Committee meets later this month it will be the first test of the new Federal Reserve Chair, Kevin Warsh to see if he bends to the will of President Trump who wants rate cuts, or will he according to the standards of macro economics increase rates in light of these job numbers, especially considering the revisions to the April report. 

“If Chair Warsh pushes for cuts at his first meeting, he will be pushing against the evidence,” said Seema Shah, chief global strategist at Principal Asset Management.

We still are seeing a mixed bag in the report not only with these concerns but also with wages that have seen a rise but much of that increase will be spent by working families on the increasing higher costs of housing, groceries, and of course, gasoline which has, on the average, since the beginning of the war in February increased to $1.25 per gallon.

Economists are worried about “the 55% rise in the price of diesel fuel, which is used in shipping, farming, transportation and construction. It can quickly raise costs for consumers as the higher price is passed down across a number of industries.”

The cost of diesel fuel which as the New York Times reported in late March, is less discernible to the average consumer but whose price has climbed faster than the price of gasoline with the war, which could lead “to inflation across a wide range of goods” affecting the price and shipping of those products that most Americans rely on.

“Diesel powers a lot of basic industries,” said Vidya Mani, a visiting associate professor at Cornell University’s business school whose research focuses on supply chains. “Mining industries, chemical factories, clothing factories — a lot of those things come from diesel.”

“Because of its far-reaching consequences, it can stop a lot of industries,” she said, adding that if prices continue to rise, consumers will probably begin to see the effects on everyday items and necessities within the next several weeks.”

“Much of the diesel in the United States comes from domestic supplies. But oil companies can still price the commodity at global market rates. In January, a little more than 40 percent of the cost of diesel came from the price of crude oil, according to the Energy Information Administration” making things even murkier for consumers as time goes by without an end to the conflict.

Meanwhile, the unemployment rate remains at 4,3 percent, but, as we've stated before, this is only a snapshot in time, and other factors must be taken into consideration: as NBC News reported, “Average hourly earnings rose 3.4% from a year ago. According to Jennifer Timmerman, an analyst at the Wells Fargo Investment Institute, that’s the lowest since 2021. In April, inflation sharply jumped to a 3.8%, its highest level in three years, due to the surging price of gasoline and the resulting economic ripple effect.”

Another worrisome statistic is that “Wholesale inflation — what businesses pay other businesses for goods and services — surged to 6% in April, according to BLS data released May 13. That was sharply higher than the 4.3% in March,” they added.

In a later report, at the middle of June, BLS reported that the Consumer Price Index rose 0.5 in May, putting the annual inflation rate at 4.2 percent over the last twelve months with energy prices over 7 percent  with the jump in  gasoline paces. The Core CPI, which excludes the volatile food and energy prices rose to  0,2 percent, and on an annual basis to 2.9 percent, creating further economic dilemma to American working families.

Wage growth slowed to 3.5 percent in May compared to April which showed 3.6 percent and that is a figure worth watching. And it’s common knowledge that a dollar doesn't buy what it used to factor in the Trump tariffs and the price of beef, especially ground beef, a staple of the American diet, shows increased prices, just in time for backyard barbecues, a warm weather staple for entertaining. Add to that the morning dose of java, those coffee tariffs are not helping with the daily grind.

For those that follow the market, “After the report, U.S. government bond yields surged and stocks sold off. Fed rate futures also quickly indicated that traders are now projecting a more than 60% chance of a rate hike in October and a more than 98% chance by December’s Fed meeting.”

Waiting may not be an option, said Beth Hammack, president of the Federal Reserve Bank of Cleveland, said on Tuesday, preceding Friday’s report,”“If we wait for definitive evidence that high inflation has become embedded in the economy, it may require larger policy adjustments, at greater cost."

The White House was overjoyed with the report, especially considering the sinking polls for Trump and his handling of the economy, and “I think that basically what we’re seeing is an enormous amount of positive momentum in hiring,” Kevin Hassett, the director of the National Economic Council, said on CNBC Friday morning.

Asked about wage growth tracking below inflation, Hassett deflected concerns on Bloomberg Television, saying that “real wages are going up on average about $3,000 since President Trump took office.”

Once again, driving labor gains over the last year was education and healthcare some of the largest contributors to job growth in May but there were surprises as well, with an unexpected gain of 70,000 jobs in leisure and hospitality, “well above the average monthly gain of 14,000 over the prior 12 months,” BLS said.

NBC reported that PNC Bank chief economist Gus Faucher noted that “the breadth of job growth has picked up in 2026.” He added that “in 2025 there were net job losses in all industries outside of healthcare, but in 2026 those industries are seeing net job growth.”

Local governments also saw job gains but in the last several months there has been a total loss of 350,000 federal jobs and many former workers are gravitating to take their experience to local governments.

One possible theory, and it’s purely speculative, is from The New York Times noted is that “construction, which has been trending up since last fall amid a massive buildup in data centers to serve the A.I. boom. Adam Schickling, an economist with Vanguard, thinks the unseasonably warm spring may have also played a role jump-starting hiring in fields dependent on weather changes.” and he added, “That is essentially something you ultimately pay back in one form or another. You’re hiring people earlier, so then you’re not hiring that person later,” he said. “I think it’s still really early to suggest that there’s a reacceleration in the labor market.”

Slowing to a crawl are financial services, including information technology to 22,000 jobs, “and the transportation/warehousing industry. That sector is “down by 92,000 [jobs] since reaching a peak in February 2025,” the agency said.”

One particular aspect that represents another cautionary note is that, as Axios reported,  “The economy has averaged gains of 114,000 jobs per month so far this year, a far cry from the 10,000 monthly average added in 2025.”

May did give some blockbusting numbers, but it’s a party that might have an end in a few months. With inflation, both consumer and wholesale, against a background of uncertainty with the US and Israel war, and as a result, with climbing fuel costs, and a host of other related factors, plus  lowered wages, the American economy gets, in our estimate, a B minus.

On Monday June 15 the Trump administration announced a memorandum of understanding with Iran towards a cease fire of 60 days and an end of week opening of the Strait of Hormuz, but international observers and economists are leery of the announcement, noting that Israel has not agreed to the deal, and that even if the Strait does reopen it will take months for price regulation to presume pre war price controls due to severe disruption of the international supply chain.

Updated 16 June 2026